What Are Some Common RRSP Questions and Answers?


Quick Answer

One commonly asked question about Registered Retirement Savings Plans is whether an investor should pay down his mortgage first or invest in his RRSP, according to Bankrate. The answer depends on the needs of the investor and the interest rate on the mortgage. An individual might consider placing money in an RRSP instead of paying down his mortgage quicker if he earns more interest from the RRSP than he pays on the mortgage.

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Commonly asked questions about RRSP encompass the best types of investments for an RRSP and whether an individual should change his investments as he ages, explains MoneySense. For those starting out, mutual funds and exchange-traded funds, which contain both stocks and bonds, are good investments and have potential for growth. Due to their higher interest income tax, an individual might also consider investing his RRSP in bonds and high-interest savings accounts. As an investor approaches retirement, he should place less of his investment in equities and stock and more in safer options because market fluctuations are more harmful for those near retirement than for younger investors.

Investors in an RRSP also commonly ask whether an RRSP is tax-free, reports Today's Parent. The answer is no, as the government taxes any money withdrawn from the account as income. However, money placed into the account is tax-deductible. If the individual is in a lower tax bracket when he withdraws the money than when he placed the money in the account, he pays less in taxes overall. Investments also grow in the RRSP tax-free.

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